NZ Post to handle Dick Smith goods

RETAIL GROWTH: Products ordered online by Dick Smith customers will be delivered by NZ Post in a three-way distribution deal.

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Australian electronic retailer Dick Smith could become one of New Zealand Post's biggest customers in the next couple of years.

A three-way distribution agreement including Australia Post, announced today, is the first of what NZ Post hopes will be many partnerships with big retailers.

NZ Post has taken over the distribution of Dick Smith's products, both to its 61 stores across the country and directly to customers who purchase goods online.

The move has NZ Post assuming control of Dick Smith's warehouse in South Auckland, which the retailer exited in February, with 21 employees transferring.

NZ Post head of international parcels and logistics Alastair Floyd said the state-owned enterprise would bring the products from Asia and Australia to the hub, where it would then be sent to stores in the country.

The deal, which followed six months of negotiations, would also involve sending Dick Smith's online orders direct to customer doors.

But Floyd would not specify just how much volume the arrangement might create for NZ Post, which last month announced an after-tax profit of $71 million for the six months to December.

This was on the back of a $32m reduction in expenditure, as the company announced last year that 2000 positions would be axed in the next few years as it reshaped the business to cope with lower mail volumes.

"We would see them becoming one of our top customers in the next one to two years," Floyd said.

The deal would also benefit Dick Smith, he said, as it looked to grow its business in New Zealand and capitalise on NZ Post's network and brand.

Dick Smith would have access to NZ Post's direct marketing and "lifestyle data", which would help create demand for its products.

Floyd said NZ Post would provide it information customers had given them, which Dick Smith could then use to target specific customers better through direct marketing.

"That will allow us to help them get to their customers and find new customers, in the areas of their stores particularly.

"And that's been quite an attractive part of the deal with them."

Australian stock exchange-listed Dick Smith's profit for the six months to December 29, 2013, was A$25 million (NZ$26.7m), on track for its prospectus forecast of $40m for the full year.

The partnership was a new area of focus for NZ Post, as it looked to grow its parcel business, Floyd said.

But NZ Post also wanted to leverage its nationwide reach to create global supply chains with international partners, especially with the growth of online e-commerce.

Floyd said the deal with Dick Smith was the first of a number "well under way", in an area which was a reality for major retailers in New Zealand.

"Ignore that at their peril, because it's certainly happening.

"We're able to support them with parcels in the e-commerce space, one supplier doing a whole range of things for particularly big retail customers."